Friendly Ice Cream Corp., the Wilbraham, Mass., operator of Friendly's restaurants and a nationwide distributor of ice cream products, and its subsidiaries filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
Friendly Ice Cream Corp., the Wilbraham, Mass., operator of Friendly's restaurants and a nationwide distributor of ice cream products, and its subsidiaries filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As part of the filing, Friendly's will enter a 363 sale process with an affiliate of its current owners, Sun Capital Partners, Boca Raton, Fla., as the lead or “Stalking Horse” bidder to quickly restructure the company and emerge stronger and more competitive.
Friendly's has secured approximately $70 million in debtor-in-possession (DIP) financing, which, along with the company's cash flow, will provide the working capital necessary to meet its ongoing obligations during the restructuring. Nearly 424 Friendly's restaurants will be open for business as usual during the company's financial restructuring with no impact to manufacturing and distribution operations. The company also expects to continue paying employee salaries and benefits, meet the needs of its guests and retail customers and honor all gift cards.
The decision to financially restructure through a Chapter 11 filing was driven largely by the challenges of the current economic downturn, significantly increased costs, particularly in commodities such as cream, rents that exceed current market rates and some of the company's current unrelated liabilities. The filing will provide Friendly's with the tools and time to strengthen its balance sheet, close underperforming restaurants, revisit certain agreements and reposition it for long-term success.
"We have embarked on an aggressive campaign to enhance restaurant operations, improve the guest experience, strengthen our team and expand the company's successful retail ice cream business," says Harsha Agadi, chairman and CEO of Friendly's. "I am particularly pleased with the enthusiastic response among our guests and employees to the recently launched 'High Five' campaign, which not only provides great meal values but is also revitalizing our brand in the marketplace.
"Thanks to our dedicated employees and franchisees, we have made a lot of progress, but our company continued to face significant financial challenges. This was exacerbated by the weak economy and rapidly rising commodity costs that have impacted the entire restaurant industry. The strategic decision to pursue a financial restructuring will allow us to proactively and quickly improve our financial position and ensure we have the resources to build a better and stronger Friendly's for our loyal guests, retail customers, suppliers and other business partners."
As part of its restructuring, Friendly's closed 63 underperforming restaurants. These closures will help the company realize important cost savings and operational efficiencies that will improve its financial foundation so it can better serve all constituencies. Friendly's encourages employees from closed locations to apply at nearby operating restaurants, where available.
Friendly's also appointed the independent financial advisory and investment banking firm, Duff & Phelps, New York, to serve as exclusive financial advisor in connection with the sale of the company's assets pursuant to Section 363 of the United States Bankruptcy Code.